SACI Motor Corp said in a filing to the local bourse that the situation will "remain grim" in the short term and that auto sales in the country are predicted to climb to 24.1 million vehicles for the full year, slightly above last year's 23.5 million.

The industry's concerns are deepened by the additional production capacity of several million units in the coming years.

Some of the less competitive local brands and cities unselective in their investment choices will be exposed to overcapacity risks, warned Dong Yang, general secretary of the CAAM.

"But overall overcapacity does not exist because China has a low level of car ownership and relatively rapid economic growth," said Dong.

Jia Xinguang, an independent auto analyst in Beijing, said auto sales were still far from saturated and vehicle restrictions haven't been introduced in less-developed central and western China, where major cities could develop their auto industry.

"It's ridiculous to follow the Detroit model, considering its decline and bankruptcy," said Jia.

"Wuhan will draw a lesson from the US motor city," said Li. "Though the auto industry represents 20 percent of Wuhan's economy, we also have some other fast-growing sectors, including optics and telecommunication, to sustain our long-term growth."

For ordinary people, overcapacity sounds irrelevant. The most visible impact is traffic jams.

"I'm glad to see the Shanghai GM plant bring about big changes to where I've lived for life," said Xu Min, a Wuhan resident. "But I hope there will be fewer cars because every time I go into town, I'm stuck in traffic."